Amazon to cut 18,000 roles in expanded layoff
Salesforce also announced plans for layoffs on Wednesday.
Photo by Christian Wiediger on Unsplash
Salesforce also announced plans for layoffs on Wednesday.
Amazon is planning to cut more than 18,000 jobs as part of a reduction that began in late 2022, and is extending into the new year.
The number of layoffs, which was shared in a memo posted publicly by the company, represents additional eliminated positions beyond what was initially shared in 2022. In November, the reported total of the layoff was 10,000 positions, but Jassy wrote at the time that reviews were still ongoing.
On Wednesday, Jassy wrote that the review “has been more difficult given the uncertain economy and that we’ve hired rapidly over the last several years.”
“These changes will help us pursue our long-term opportunities with a stronger cost structure; however, I’m also optimistic that we’ll be inventive, resourceful, and scrappy in this time when we’re not hiring expansively and eliminating some roles,” Jassy wrote. “Companies that last a long time go through different phases. They’re not in heavy people expansion mode every year.”
The layoffs will mostly affect Amazon Stores, which encompasses ecommerce and physical retail, as well as the division known as People Experience and Technology, which encompasses people ops and culture functions.
Jassy wrote that the layoffs will begin on January 18. The company had planned to communicate all of this following communication with employees, but news of the additional layoffs was leaked to the Wall Street Journal, prompting the official word to be delivered sooner.
The cuts come as Amazon continues to recalibrate following the COVID-19 pandemic. Prompted by a spike in ecommerce demand, the company massively expanded its logistics network and hired rapidly over 2020-21. But by April of 2022, the company said it had too much capacity in its network. Amazon has since engaged in belt-tightening, including making cuts to certain future-facing tech projects like home delivery robots and to its devices team. This week, Amazon also disclosed that it secured an $8 billion loan, to be used for general expenses this year.
The layoffs come after the company communicated uncertainty about its prospects heading into the recently-completed fourth quarter and the holiday shopping season. While Amazon last week said it had a record holiday shopping season and shared that 60% of items purchased were from third-party sellers, it has yet to release numbers showing overall results.
Amazon is not the only company that provides the tech infrastructure of ecommerce to make layoffs in recent months, as Meta, Shopify and Stripe have also let go of large numbers of employees. But Amazon's planned number of employees is now the highest so far of this wave.
On Wednesday, Salesforce, which provides ecommerce tools to brands and retailers through Commerce Cloud as part of a wider CRM business, said it would lay off 10% of its workforce. That’s about 8,000 employees, the New York Times reports.
“As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that,” CEO Marc Benioff wrote in a memo to employees.
The convergence of inflation, interest rates and consumer shifts back to pre-pandemic preferences for experiences and in-person shopping created a difficult environment for tech companies that saw the biggest rise during pandemic years that saw demand for goods and digital adoption explode like never before. Wednesday’s layoffs are a sign that the fallout will continue in 2023.
Accurate inventory is now essential for Amazon FBA sellers, writes Emplicit's Evan Sherman.
Amazon used to be a lot more laissez faire about how Fulfilled By Amazon (FBA) sellers used their fulfillment centers. Sellers could send in inventory, and, while the space wasn’t unlimited, if their sales were not as forecasted they would simply pay long-term storage fees. Sure, if a seller’s inventory management was poor enough they would have their inventory storage limits reduced and pay higher storage fees, but this was just an incentive not to let things slide too much.
However, in 2022 Amazon reduced storage limits overall to the point where some FBA sellers had sales and catalog size impacted, and in March 2023 Amazon revised their inventory system. There is now an incentive for FBA sellers to be highly accurate with inventory management because Amazon will reward them with increased storage limits. Precision is a carrot now, rather than a stick.
In this article, we provide five strategic methods that sellers can utilize to optimize inventory management on Amazon.
Achieving successful inventory management on Amazon requires a profound understanding of past demand patterns and the capacity to accurately forecast future demand. Seasonality, market trends, historical sales figures, competitor activity and planned promotions all play a crucial role in determining the trajectory of sales.
At Emplicit, we advocate for the analysis of multiple historical data points, encompassing previous 7, 30, 60, and 90-day sales figures. Our logistics experts factor in internal factors such as stock availability, marketing spend, promotions, and sales and margin targets, and external factors such as seasonality, Amazon trends, new category restrictions and market entrants. A comprehensive review of shipments in working, shipped, or receiving status is also beneficial. Striking a balance between what has been sold, what is available, and what's en route to an Amazon fulfillment center is key to precise forecasting.
Inventory management isn’t a static task; it requires constant vigilance and flexibility. FBA sellers should regularly review and modify their demand forecasts, adjust their replenishment suggestions based on demand shifts, and update their minimum reorder points as required.
Sellers should review sales daily, plan replenishment frequencies to suit their needs, and maintain appropriate inventory levels at Amazon. Weekly replenishments can help keep a seller’s inbound pipeline full, minimize out-of-stock instances, and account for unforeseen supply chain disruptions.
Amazon’s organic and paid algorithms prioritize products with high sell-through rates. This means best selling products end up selling better. Focusing on high-performing items allows FBA sellers to reduce monthly storage costs, avoid aged inventory and the associated fees that Amazon imposes, and curtail the need for costly removal orders. And sales velocity is the quickest way to get Amazon to increase your storage limits. Concentrate on the 20% of items that generate 80% of sales.
At the same time, sellers should prune their catalogs by removing slow-selling items. These items negatively affect Amazon’s Inventory Performance Index (IPI) score, which directly influences the space Amazon allocates to a seller’s inventory in their fulfillment centers.
If sellers are tight on inventory space, as well as the best-selling products, they should prioritize products with higher margins until Amazon provides additional storage, and they should reduce marketing spend accordingly – something which necessitates a close relationship between inventory and marketing.
Ranking products by sales and margins, and calculating the storage space each product takes up will go a long way towards understanding and anticipating demand on Amazon.
Amazon’s capacity management system is a new system for allocating inventory limits to FBA sellers and allowing sellers to gauge their inventory capacity at Amazon’s fulfillment centers. It also enables sellers to bid on increases to their inventory limits.
Previously, Amazon had restock limits which were updated weekly based on the seller’s previous 90-day sales. Restock limits were determined by Inventory Performance Index (IPI) metrics such as sell-through, excess inventory, and stranded inventory. However, because the restock limits were updated weekly, it was challenging to plan accordingly, especially heading into a peak season or if a seller was about to run a promotion.
With Amazon’s Capacity Monitor program, sellers are given a monthly capacity outlook based on the cubic feet of space occupied by their products in Amazon’s fulfillment centers and their IPI metrics. Amazon not only provides a current month outlook on available space; they provide an estimate for the next three months which can aid in the inventory planning process.
To take advantage of the new system, it’s imperative FBA sellers understand their product's physical footprint in relation to the allotted space Amazon provides (Amazon does still provide unit estimates). Knowing a product’s cubic feet and the product tier designation allows for effective planning of inventory replenishment. Exceeding space limits means overage fees from Amazon, however, if a seller knows they have a peak in sales coming up they can bid for additional capacity (in cubic feet). However, selling-through this additional inventory means Amazon waives those fees, so it’s a win-win.
At Emplicit, we have seen the capacity monitor program benefit our clients, with many clients seeing an increase in the amount of inventory they can ship in – likely due to healthy sell-through velocity and other IPI metrics. The program has fundamentally changed the way we approach managing our inventory on Amazon, so everything sellers do regarding inventory planning should be within the context of Amazon’s capacity monitor program.
Smart sellers should already be considering the impact of their product packaging on their FBA fulfillment fees. If the actual product size allows, sellers can generate significant savings by reducing the size of their packaging. Amazon’s Small Standard rates are 15-20% cheaper than Large Standard rates depending on weight, and Amazon’s Small & Light rates are 15-27% cheaper still than Small Standard rates. However, fulfillment cost savings are not the only reason to reduce packaging size, smaller packaging can significantly increase Amazon inventory cost-efficiencies.
With Amazon’s capacity management system providing inventory space based on cubic feet rather than number of units, the space each product takes up is now more important than ever. While larger packaging sizes can sometimes improve sales in brick and mortar retail, sellers should consider developing smaller Amazon-only packaging. This will not only reduce fulfillment costs, but allow more units to be stored in the same inventory space. The combined savings can more than offset the cost of a redesign and second packaging print run.
Additionally, smaller packaging may qualify sellers for Amazon’s Compact By Design badge. This helps brands stand out, and increases click-throughs and conversions. (We suspect there are algorithm tweaks for brands with certain badges too, but it’s difficult to prove.) Amazon-specific packaging can help with Transparency (anti-counterfeiters) and help combat unauthorized resellers.
While it might seem like a significant investment and not something the inventory team typically gets involved with, reducing packaging size is a long-term way for FBA sellers to optimize inventory management.
Amazon Global Logistics (AGL) offers a streamlined solution for sellers whose products are manufactured in China. AGL eliminates the need to use freight forwarders who would usually receive a shipment from China, then split up that shipment and forward on to multiple Amazon fulfillment centers per the standard FBA process. Instead, sellers can book shipments directly with Amazon, complete the necessary export/import documentation, and ship directly to US, UK or European fulfillment centers – sending the entire shipment to a single fulfillment center.
If leveraged properly, AGL can save sellers thousands of dollars in warehouse and 3PL fees and reduce the need for inventory to be processed multiple times before it arrives at Amazon’s fulfillment center, meaning inventory gets where it needs to be quicker.
AGL offers two shipping options – Standard Ocean Freight and Fast Ocean Freight – with the standard option giving sellers the opportunity to either ship via a full container load (FCL) or less than container load (LCL). Shipping partial container loads with Amazon doesn’t slow shipments down versus other carriers because of Amazon’s scale. Amazon’s economies of scale mean that AGL can offer shipping prices from mainland China and Hong Kong that most sellers are unable to match. And Amazon’s expert customs brokers get products cleared through customs quickly because Amazon has a vested interest in shortening the time to market.
This one-step international shipping direct to Amazon was actually something we pioneered before the advent of this service from AGL – working with our client Shapermint and their manufacturers in China and logistics team to ensure packaging and shipments were FBA compliant. However, now AGL offers this service, it’s an even easier solution to a common challenge. We suspect AGL will roll out in other international manufacturing markets, but Amazon is tight-lipped for now.
Amazon inventory management is complex and needs constant attention. Sellers can hire a fractional inventory specialist because this is not something that should be trusted to an Amazon generalist. If sellers get inventory right, it will keep pace with sales. But if they get it wrong, their inventory can become the main thing holding them back.
Evan Sherman is the director of logistics at Emplicit.